What it is
A larger amount, usually $300 to $3,000, repaid in equal monthly installments over 3 to 24 months. Interest can be charged on the remaining balance (cheaper) or on the original amount (dearer). Always ask which.
Who it suits
People with steady income and a planned expense: a motorbike for work, school fees, a house repair. Not for emergencies.
What it usually costs
You borrow $1,000 for 12 months at 1.4% a month on the remaining balance, plus 1% admin. You repay $91.11 a month, $1,103 in total. The same loan at 1.4% on the original amount would cost $1,178.
See what it costsWhen not to use it
- If the monthly payment is more than a third of your income.
- If you are not sure your income will stay the same for the whole term.
- If you could save for it over a few months instead.
Questions to ask
- 1.Is interest on the remaining balance or the original amount?
- 2.What is the total I repay in dollars over the whole term?
- 3.Is there a fee if I repay early?
- 4.Is anything taken as collateral? What happens if I miss a month?